Monday was an extremely trying day for my portfolio and me. Talk about depressing. Let's see, CapitalSource (NYSE: CSE) took a dive of almost 15% on hellishly high volume (it traded more than 17 million shares on Monday, and AOL Finance lists the 30-day average volume as being a little under 3 million shares) on news about a money-losing sale of assets. Now, once I saw CapitalSource moving down, I knew that Newcastle Investment (NYSE: NCT) wasn't going to be trading higher. Sure enough, there was indeed something new at Newcastle. A new 52-week low. The stock closed Monday at $7.06, down 10% and one penny above the low. And then there's MFA Mortgage (NYSE: MFA). It too was down, although only about 2%. Yeah, only. All of these stocks are at prices well below my cost basis.
I'm at that weird crossroads all investors find themselves at some point. Is it too late to sell? Let me tell you, I don't want to be one of those panic sellers who regrets dumping his stocks because as soon as he does so they start to rise. But, I don't want to be one of those holders who doesn't know when enough is enough. It's pretty rough. You don't know whether to add to positions that are faring poorly and thus risk throwing away money, or whether to avoid adding money and thus risk not getting some bargain prices. And in terms of Newcastle, my colleague Sheldon Liber is with me on this. He thinks the stock may turn out to be a value. See this article.
My other colleague, Timothy Sykes, has counseled me to instead focus on strong stocks that are working. I can't say he doesn't have a point. Indeed, my portfolio does seem rather masochistic. For now, though, I will try to avoid any emotional decisions. I am going to continue to watch the financial carnage as it further unfolds and evaluate every potential stock trade very carefully. This summer is going to be a tough one. I'll let you know what happens.
Disclosure I own CapitalSource, MFA, and Newcastle Investment; positions can change at any time.
Don't know where the market is headed? Some people think a full blown crash is possible; some believe this is a good time to buy while others just don't know what to believe. Well, I just don't care and neither should you.
Because if you're like me, you've learned to take everything one high percentage profit trade at a time, whether you're betting on higher or lower prices. That's right, I'm talking about easy individual market inefficiencies like THIS.
As for the markets a whole, it's the same pathetic guessing game it'll always be, filled with plenty of "gurus" with polished-sounding theories where only a few truly brilliant hedge fund managers guess correctly with the rest of us just trying not to pull a Bill Miller (look foolish).
Judging from previous articles like this, can you guess what I'm going to write about? By now I think you should know my core beliefs-while everyone and their mother is covering the wheeling and dealings of hugely important corporations hence efficient stocks like Google Inc (NASDAQ: GOOG), Yahoo Inc (NASDAQ: YHOO) and Microsoft Corp (NASDAQ: MSFT), my blog's readers and I are having much more fun profiting from trading mostly short selling...well actually all short selling-smaller infinitely more inefficiently priced companies like GRO, PTEK and STXX, all of which were "pumped up" by various temporary catalysts.
For Agria Corp (NYSE: GRO), it was message board hype, PokerTek Inc (NASDAQ: PTEK) had a combination of message board hype, rumors and press coverage and South Texas Oil Co (NASDAQ: STXX) got a stock promoter mention, and now that those temporary catalysts have come and gone, all three have reversed hard off their highs. And mind you, while many pumps are accomplished on the infinitely ore sketchy OTCBB and Pink Sheet exchanges, all three of these companies are trades on more reputable markets like the NYSE and NASDAQ. And yes, I profited solidly on all three, increasing my yearly gain to around 40%.
Now I'm looking at stocks like Source Interlink (NASDAQ: SORC) as a potential short, which is up on insider buying, a catalyst I don't respect, but since there's not enough space for me to cover all the details of exactly what I look for here--it's about chart patterns, price action and volume. Today, I am doing a special Friday the 13th marathon episode of my LiveStock show. To the untrained eye, I know these small stocks seem scary, but maybe after this journey, I can help you better understand them.
I have to admit, I completely missed this move. I usually keep tabs on Playboy (NYSE: PLA)'s stock action. Not very close tabs, truthfully, but I do check in somewhat regularly. I was shocked when I saw how low the stock had recently dropped. Back in the first week of May, when I reported on the adult-entertainment entity's earnings, the stock was trading around $7.25. As of Thursday's close, the stock was priced at $5.85 per share. The 52-week low now stands at $5.52. TheStreet.com recently cursed the stock to sell status.
That's a steep move in such a short period of time, and now I have to ask myself: Is the stock a trade? I mean, a thought that immediately came to my mind upon seeing the current share price was that the Wall Street movers and shakers may have overshot on the selling here.
But then, other thoughts came to mind such as how badly the company has been doing. Also, as Zac Bissonnette recently pointed out, pornography isn't really recession-proof at all in this age of the Internet. Seekers of adult entertainment have seen their wallets benefit from the proliferation of the clip culture as expressed by sites like YouTube and its more porn-friendly counterparts.
I know, I know, with the economy sputtering, why would you ever want to be invested in an apparel company that produces expensive jeans? Let alone have it recommended by a typically short-selling trader like me! But before I tell you the name of this stock that despite the obvious economic problems -- strong oil, weak housing and the dollar, mounting foreclosure, etc -- is sitting right near all-time highs, looking to break out, let's do a quick rundown of its competitors in the apparel retail space.
Forget about overwhelmingly random stock market noise and small daily percentage moves exemplified by the likes of all the most popular names such as Yahoo! Inc (Nasdaq: YHOO), Citigroup Inc (NYSE: C), Pfizer Inc (NYSE: PFE), Google Inc (Nasdaq: GOOG) and Apple Inc (Nasdaq: AAPL). Don't be fooled by the all-too-frequent daily commentary-those stocks are really only good for long-term investors and the few truly professional traders out there.
If you're neither, focus more on market inefficiencies because not only are they more predictable, but they're ideal for smaller investors and traders thanks to their illiquidity. Meaning the market offers up these high profit probability opportunities that the big boys can't and won't take advantage of-they're strictly for us little guys.
I'm talking about price moves created by the quirks of the finance industry itself-namely the media circus, stock promoters and hype that influence the great derided microcap market. For example, when a CNBC reporter inadvertently suckers amateurs by pumping a penny stock (good short selling opportunity as the stock is now down 50% in a month) or when a stock promoter is paid to hype a stock (another one down 50%+ in one month since).
Way back in early March I highlighted 10 horrifically downtrending stocks and said not to even think about buying them until they broke their nasty trendlines to the upside.
Over the past few weeks, many have displayed solid sideways price action, but it wasn't until yesterday that the high volume breakouts occurred. I'm talking about those 50+ million shares traded, 10%+ price surges beautifully accomplished by such popular names like Sprint Nextel Corp (NYSE: S), Broadcom Corp (NASDAQ: BRCM) and Level 3 Communications Inc (NASDAQ: LVLT).
Unsurprisingly, several other stocks also showed similarly strong price action:
In this April 1st article, I wasn't kidding around when I chose less popular stocks over hotly debated names like Google (NASDAQ: GOOG), Apple Inc (NASDAQ: AAPL) and Lehman Brothers Holdings (NYSE: LEH). Because investing is not blogging-the amount of hits, traffic and debate a topic stirs up does not help you make money (in fact it might hinder it considering all the cheerleaders are already invested).
Instead, as I often say in posts like this and as I yell to random passers-by on the streets of NYC (for fun), "it's all about the charts, stupid!"
Now, one week later from that article, ask me if I am surprised to see 2 out of the 3 stocks from last week's article-Weatherford International (NYSE: WFT) and United States Steel Corporation (NYSE: X) continuing to breaking out to new highs, with Illumina Inc (NASDAQ: ILMN) "struggling" up only 4% on the week, a few cents off its highs.
In the last few days, bookselling giant Amazon.com Inc (NASDAQ: AMZN) has made a few more enemies in the publishing world by forcing the little-known group of print-on-demand (POD) publishers to either submit to using its POD subsidiary, Booksurge, or risk being prohibited from selling on its industry-leading website. No matter the cost and complications of breaking off relationships with other vendors, reformatting books and a host of other problems, Amazon laid down the law, saying convert -- and do it quickly -- or face the consequences.
What's more disconcerting is that an official press release was made public only after smaller publishers like Angela Hoy of Booklocker.com started writing publicly about blackmail-type phone calls from Booksurge representatives. Fearful of losing their businesses literally overnight, many POD publishers such as iUniverse and Lulu have capitulated while strong willed publisher PublishAmerica refused to give in -- and was quickly made an example of when Amazon disabled the buy buttons on their book titles!
As an author selling my own critically-acclaimed POD book An American Hedge Fund on Amazon, outrage has compelled me to write about how unethical and more importantly, monopolistic this all is.
The financial media -- envious of the fat profits generated by such entertainment-based businesses as World Wrestling Entertainment Inc (NYSE: WWE), Las Vegas Sands Corp. (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN) -- has brainwashed you into believing that in order to make money in the stock market, you must keep up to date with every single headline and development in the business world. Hogwash!
I have no problem with financial entertainment, but I do take issue with all these media outlets making their content out to be useful to investors. I've repeatedly echoed this theme in articles like this and I don't expect this industry to change anytime soon, but I am going to keep preaching so you will better understand how low your chances of success are if you bet on the most popular -- hence the most efficient -- topics du jour. Unless you are George Soros or Warren Buffett or a few other wealthy elderly men, there is always somebody better informed and more intelligent than you are. Hence, you are always at a disadvantage.
Even in these uncertain times, there are stocks that have far better odds of outperforming than others. Yup, for a minute, just forget about all the different industries, economic guessing games, earnings-valuation time lags and the rest of the market randomness that makes stock picking so difficult and "market gurus" so ineffective. Focus instead on the incredibly telling stock charts of these companies:
I primarily trade fun smallcap stocks, so until the past few days, I hadn't either. But when I began researching, I just kept finding more and more interesting ETFs -- it was addictive! Almost addictive as my new Twitter account where I've discovered I can chat with business legends, yesterday it was the founder of eBay Inc (Nasdaq: EBAY). Okay, maybe ETFs will never be that addictive!
Out the few hundred ETFs I looked into, here were some of the more interesting of the bunch:
It was just an average Wednesday night for me-researching potential stock plays, working on some blog posts and catching up on many overdue emails, all to further my goal of becoming Cramer 2.0-when I saw a post on EliteTrader.com that linked to The Smoking Gun exposing Governor Spitzer's call girl "Kristen" as 22-year-old Ashley Alexandra Dupre. Apparently, Kristen was/is her professional name. Always one to jump when opportunity knocks, I raced to dig up everything I could on Ms. Dupre to post on my blog and break some news of my own. What happened next might or might not blow your mind.
Several websites had already linked to her MySpace profile (owned by News Corp. (NYSE: NWS) so I went there and grabbed her photos to add to my story. The other sites had used the photos, too, but the pictures were all tiny and spread out over multiple pages (no doubt to increase their hits and subsequently their Yahoo! (Nasdaq: YHOO) ads, so I saw opportunity in providing them all on one page just as they were. But I didn't stop there.
I also searched other social networks like Facebook and bingo, she had a profile there! That would be "my exclusive." A few more clicks and the post was published. Within minutes, Google (Nasdaq: GOOG) has indexed my article and while I was late to the party, my "Facebook Exclusive" made my story unique and the hits tumbled in. I'm used to 200-ish visitors/hour, but thanks to this one simple post, 1,500 people visited my site within the first 45 minutes. And that's when things got interesting.
Given our society these days, should we really be surprised by crusading Governor Eliot Spitzer's prostitution scandal? These days it seems like all our heroes let us down, whether they be superstar athletes like Roger Clemens (steroids) and Michael Vick (animal cruelty), widely held technology stocks like Google (NASDAQ: GOOG) (less clicking, 40% drop in stock price) and Apple (NASDAQ: AAPL) (imperfect, 40% drop in stock price) and once-pillars of the finance industry Merrill Lynch (NYSE: MER), Citigroup (NYSE: C) and Bear Sterns (NYSE: BSC) (all had too much exposure to subprime mortgages and municipal bonds).
Mind you, in no way do I condone Spitzer's behavior -- the night before Valentine's Day no less -- but in the grand scheme of things, he's done a whole lot more good than he's done bad. You might even say it takes a criminal to know one! He'll probably be forced to resign and while sad, it should motivate him like never before to gain back the respect he once had.
For all the value and integrity we place on sports, it's really nothing more than entertainment. In no way can I defend Vick, but Clemens clearly loves his sport and simply could not let anything stop him from being the best. While it's sad that his career will be forever marred, it's a great lesson to teach kids to never cheat -- no matter what.
Well, all I can say is that today has been one of the worst days of my portfolio's life. I'm not concerned about my core holdings -- Disney (NYSE: DIS), Coca-Cola (NYSE: KO), General Electric (NYSE: GE), stuff like that -- but, boy oh boy, are my financial positions taking some major hits!
I know, I know -- you're saying to yourself, "uh, buddy, didn't you realize this was going to happen?" Sure, but when the theory becomes reality, that's when the torture really starts to set in. Not sure if you caught the wave of downgrades today -- if you didn't, check out Eric Buscemi's post about it -- but I got hammered by one of them. MFA Mortgage (NYSE: MFA) was downgraded by Keefe Bruyette on book-value concerns. As I write this, it's trading down over 15% -- oooh, it hurts to write such a double-digit figure -- on, get this, volume of over 15 million shares. The 30-day average volume is closer to 4 million shares. I'm writing this with a couple hours to go to close! It's going to be a huge volume day once all is said and done. I also own Newcastle Investment (NYSE: NCT), CapitalSource (NYSE: CSE) and MFA preferred shares (NYSE: MFA-A).
Have I been shaken out yet? No. In fact, in terms of MFA, I personally think that it is a buy, even though it could be in falling-knife mode right now (that's always difficult to discern). I know Timothy Sykes would disagree on this strategy, so you should check out his post for some balance. With Ben Bernanke most likely set to cut the Fed Funds rate even further, MFA should benefit, as should most financials. I also like CapitalSource, but I am a little wary at this point of Newcastle -- I think it will recover, but that one's been particularly volatile. As they say, when there's blood on Wall Street, that's sometimes the best time to do some judicious buying (after a ton of due diligence, of course). And, as a postscript, if you want to do only safe buying, then Disney, Coke and GE might be good ideas to look at -- GE has an especially interesting yield right now.
Disclosure: Steven Mallas owns shares in Disney, Coca-Cola, MFA common and MFA preferred, CapitalSource, Newcastle Investment, and GE. Positions can change at any time.
I have to admit, I completely missed this move. I usually keep tabs on 
I know, I know, with the economy sputtering, why would you ever want to be invested in an apparel company that produces expensive jeans? Let alone have it recommended by a typically 
Forget about overwhelmingly random stock market noise and small daily percentage moves exemplified by the likes of all the most popular names such as 
In 
If you've ever delved into investing in ETFs (exchange-traded funds, basically entire indexes and sectors that trade like stocks), you're already familiar with the most popular, those being 
Given our society these days, should we really be surprised by crusading Governor Eliot Spitzer's prostitution 
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